“Economic data is likely to continue to be weaker in the
second quarter,” said Mao Sheng, an analyst for Huaxi
Securities Co. in Chengdu. “The government’s current policy is
to be risk averse and focus on the restructuring of the economy,
so data like today’s PMI is acceptable for them. As such, our
recovery may be much weaker than we had hoped for and this will
drag stocks.”

The Shanghai Composite has slumped more than 10 percent
from a Feb. 6 high on concern slowing growth will hurt earnings.
China’s economy expanded 7.7 percent in the first quarter,
missing estimates, as industrial production and fixed-asset
investments in March fell short of forecasts. Rising Chinese
home prices may limit scope for stimulus as President Xi Jinping
seeks to prevent a real-estate bubble.

‘Normal’ Growth

In Washington last week, central bank Governor Zhou
Xiaochuan said the pace of growth was reasonable and “normal.”

Anhui Conch tumbled 5.9 percent to 18.10 yuan, its biggest
drop since March 4. The company reported first-quarter net
income fell to 972 million yuan ($157 million) from 1.25 billion
yuan a year earlier. BBMG Corp. plunged 6.8 percent to 6.63
yuan. The cement producer said last week it expects a 60 million
yuan loss in the first quarter.

China’s industrial growth is facing downward pressure amid
slowing domestic and international demand, a Ministry of
Industry and Information Technology official said. The lack of
“efficient demand” and the unwillingness by companies to
invest are among challenges to the industrial economy, Xiao
Chunquan, a MIIT spokesman, said at a briefing in Beijing today.

Spending Slowdown

“This has been a very narrowly based recovery,
predominantly driven by infrastructure investment, but now even
infrastructure investment is also apparently slowing down,”
said Tao Dong, head of Asia economics excluding Japan at Credit
Suisse Group AG in Hong Kong.

Valuations on the Shanghai gauge fell to 9 times projected
12-month profits, compared with the seven-year average of 15.8,
data compiled by Bloomberg show. Trading volumes in the Shanghai
index were 4.6 percent higher than the 30-day average at the
close, according to data compiled by Bloomberg.

China’s local government financing vehicles will have to
repay about 3.49 trillion yuan of loans over the next three
years, China Business News reported, citing the country’s
banking regulator.

Debt that will come due in that period accounts for about
37.5 percent of total loans to governments at the province,
county and municipal levels, Shang Fulin, chairman of the China
Banking Regulatory Commission, told an internal meeting,
according to the newspaper. Two phone calls to the regulator’s
press office by Bloomberg News went unanswered.

A gauge of property developers on the Shanghai Composite
tumbled 3.6 percent. China Vanke Co., the nation’s biggest, lost
3.5 percent to 11.28 yuan, even as the company reported a 16
percent increase in first-quarter profit. Gemdale Corp. sank 4.9
percent to 6.99 yuan.